‘Jeremy Hunt called his new NHS posting "the greatest privilege of my life". That was before he saw his in-tray.' Photograph: Rosie Hallam/Getty

Beaming from ear to ear, Jeremy Hunt called his new NHS posting "the greatest privilege of my life". That was before he saw his in-tray. He must by now be gazing at a pyramid of hand grenades with loose pins – although he may not recognise them until they explode.

He is, after all, without any experience of this most complex and delicate service in the midst of a deliberately disruptive re-disorganisation and commercialisation, one the NHS chief executive famously calls "big enough to be seen from space". What's more, Hunt's job is to do two impossible things at once.

First, it's full steam ahead on the great plan. Woebegone Andrew Lansley was assured there would be "no stepping off the gas". Indeed, set hard in law, under the new act there can be no turning back on the competition regime that lets "any qualified provider" bid for every part of the health service, a process already bursting out into more local private contracts than we can count. The NHS is the chosen testbed for the Open Public Services white paper plan to outsource all the public sector – though trying it first on the NHS was like putting in the miner to see if the air was safe for the canary. Hunt has no problem with the big idea; as co-author of a revealing 2005 pamphlet, he announced: "Our ambition should be to break down the barriers between private and public provision, in effect denationalising the provision of health care in Britain." But between the neat ideology and the chaotic reality, he will find a great chasm.

His second task contradicts the first: No 10's instructions are to close down NHS trouble before the election: stop the noise, tell a good story, schmooze the staff, keep it off the headlines – all this with cuts beyond anything the NHS has ever known. Lansley was sacked, they say, for failure to communicate: all that's needed is a change of messenger. Hunt's smiley face, silver tongue and naked ambition will ensure he neutralises Cameron's greatest electoral hazard after the economy. Frankly, it's a hopeless task: lipstick on a pig.

What will he find? Cash crises breaking out all over. The King's Fund deputy director says cuts will be closer to £50bn than £20bn. John Appleby reports a 1% cut each year, compounded by 2.5% inflation, when the NHS always hits crisis without at least 2% above inflation to keep up with ageing patients. The NHS Confederation warns of "a super-tanker heading for an iceberg". There is emergency cash saved by the NHS Commissioning Board this year: Appleby expects mounting trouble from next year to election year. Labour private finance initiatives exacerbate the problem – but PFIs are only 1% of NHS turnover.

The South London Healthcare NHS Trust in administration is harbinger to many more. Foundation trusts, supposedly financially secure, are among the next – Peterborough losing £50m a year is top of the danger list, with a long tail of others. The Department of Health is cutting tariffs, putting the bottom 10% in peril. No 10 is alarmed by a string of A&E and maternity units set for closure: with William Hague, Paul Burstow and Iain Duncan Smith demonstrating to save local hospitals, what chance of persuading the public that some re-configuring is essential?

Set aside the destructive nature of the NHS plan, and the immediate crisis springs from creating total turmoil at a time of what Stephen Dorrell, the health select committee chair, calls the toughest cuts ever imposed on any health service in the OECD. The official price is £3bn, but that's not counting lost productivity and expertise as everyone reapplies for their job and frightening numbers of senior managers quit, with a real shortage of expertise to fill the 212 clinical commissioning groups. Nick Timmins's report Never Again, a clear-eyed analysis of Lansley's chaotic act, quotes senior civil servants warning: "We did point out to him that his plans were written before the big financial challenge, and didn't that change things? He completely did not see that at all. He completely ignored it."

Labour fought the election with an honest if dangerous plan to rationalise many hospitals units. Health experts all agree it must be done. But however well planned and well consulted, closures are always unpopular. Cameron's flagrant dishonesty – "I'll cut the deficit, not the NHS", now neatly reversed – was matched by lies about "Brown's cuts" as he joined picket lines at Chase Farm hospital, long needing reorganisation, in 2007. That led to a cowardly moratorium on all closures for two crucial years. Now managers wait to see if Hunt will again kick these into post-election never-never land. If so, he will need to prise money from the Treasury to prop up failing hospitals, with money needed for the community.

Meanwhile, the great ideological plan marches on. Here's the paradigm: Basildon and Thurrock University Hospitals' accounts show an income drop of 13%. Why? Because severe rationing of treatments has cut the number sent for operations. The new president of the British Orthopaedic Association warns that rationing by "draconian referral criteria" for hip and knee replacement denies treatment until people lose their independence, while 120,000 wait on lists for more than 18 weeks. How will Basildon and others fill their cash gap?

The Financial Times reports that the financial plan is for a large expansion of private work, aided by NHS restrictions fuelling a steep rise in patient-funded private surgery for hips and knees. So that's the way the NHS goes – rationing pushes more patients into the private sector: the act lets hospitals use 49% of beds for private work. Already insurance companies are jumping in to offer top-up cover for services the NHS is withdrawing. Under Labour, private practice dropped sharply as NHS waiting times fell to near zero: general hospitals were allowed to use only 2-3% of their facilities for private practice. Now that's in reverse – and it won't be popular.

A burst of takeovers of GP surgeries by private companies is an early visible sign to the public of what's afoot: in Cameron's own Witney seat, Virgin Care has taken over Deer Park Medical Centre, with an exodus of staff and patients, amid many complaints about locums.

Jeremy Hunt soon has to take secondary legislation through parliament so the regulator Monitorcan absorb the competition board – the most contentious driver of NHS commercialisation. That will be rowdy. He may beam with satisfaction at the fulfilment of his pamphlet's plan. But that's a hard sell to most voters, no matter how nicely he smiles.

polly.toynbee@guardian.co.uk

• This article was amended on 7 September 2012 because it said incorrectly that "Monitor, the regulator, is cutting tariffs, putting the bottom 10% in peril". Monitor is not yet involved setting NHS tariffs; it will be from 2014.

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